Your New Employer,Freeman Software,is Considering a New Project Whose Data

question 72

Multiple Choice

Your new employer,Freeman Software,is considering a new project whose data are shown below.The equipment that would be used has a 3-year tax life,and the allowed depreciation rates for such property are 33.33%,44.45%,14.81%,and 7.41% for Years 1 through 4.Revenues and other operating costs are expected to be constant over the project's 10-year expected life.What is the Year 1 cash flow? $\begin{array}{ll}\text { Equipment cost (depreciable basis) } & \$ 65,000 \\\text { Sales revenues, each year } & \$ 60,000 \\\text { Operating costs (excl. deprec.) } & \$ 25,000 \\\text { Tax rate } & 35,0 \%\end{array}$

• A) $30,333
• B) $31,849
• C) $33,442
• D) $35,114
• E) $36,869

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